US private equity giants Carlyle Group and Warburg Pincus reduced stakes in two financial firms in separate deals, writes Reuters. Carlyle sold a quarter of its stake in India’s top mortgage lender, Housing Development Finance Corp, raising about $270 million and nearly doubling their money from a 2007 investment, according to Reuters. In an unrelated deal, Warburg Pincus sold about 17.5 million shares in lender Kotak Mahindra Bank through stock market deals to raise about $170 million.
Reuters – U.S. private equity giants Carlyle Group and Warburg Pincus took advantage of India’s recent stock market gains to reduce stakes in two financial firms in separate deals on Wednesday, a sign of investor wariness about the sustainability of the current rally.
Carlyle CYL.UL sold a quarter of its stake in India’s top mortgage lender, Housing Development Finance Corp (HDFC.NS), two sources with direct knowledge of the matter said, raising about $270 million and nearly doubling their money from a 2007 investment.
In an unrelated deal, Warburg Pincus sold about 17.5 million shares in lender Kotak Mahindra Bank (KTKM.NS) through stock market deals to raise about $170 million, three sources with direct knowledge of the matter said.
The two block deals came after India’s main market finance/markets/index?symbol=in%21sen”>.BSESN rose 11.3 percent in January, its first rise in three months, and the best month since September 2010. It was the best January
rise for the index since a 19.4 percent rise in 1994.
India’s stock market dropped nearly 25 percent in 2011, making it one of the worst global performers and leaving few options for private equity firms to exit from their portfolio companies either through IPOs or block deals.
“Many financial investors who have completed their four to five year investment cycle in the Indian companies are rushing to exit through market deals,” said the India equity capital markets head at a European bank in Mumbai who was not authorized to speak to the media.
“We will see more blocks and follow-on share sales in the first half of this year than IPOs. Investors, who had put in money four, five years back will make good profits by exiting in this market,” he said.
Private equity exits through the Indian IPO market dropped 66 percent last year to $85 million in 15 deals, according to data from VCCircle.
KPMG expects that roughly $95 billion in Indian private equity investments made during the bull market years of 2006 to 2008 will come up for sale over the next three years.
Carlyle, which owned about 5.2 percent of mortgage lender HDFC before Wednesday’s block deals, sold about 20 million shares at an average 677.25 rupees apiece, one source said.
The Washington-based private equity heavyweight will retain nearly 4 percent of HDFC after the deal. The exit is the first from the Indian market by Carlyle Asia Partners, a buyout fund, a source said.
At the current price, Carlyle has nearly doubled the return on its 2007 investment, one source said. Deutsche Bank (DBKGn.DE) was the sole manager of the block deal, sources said.
Before Wednesday, Carlyle was the No. 2 shareholder in HDFC after Citigroup (C.N), which owns 8.8 percent.
In June 2011, Citigroup (C.N) sold a 1.5 percent holding in HDFC. The sale was done ahead of the adoption of a global accord on banking that discourages large holdings by banks in other financial institutions.
Carlyle last month sold 18 million shares in China Pacific Insurance (Group) Co Ltd (601601.SS) (CPIC), taking its holding below 5 percent.
Warburg Pincus sold 17.5 million shares in Kotak Mahindra, which represent 2.4 percent of the bank’s outstanding equity, at 490 rupees each, said the sources who declined to be identified as the matter was not public yet.
Warburg Pincus, which manages about $30 billion globally, held nearly 6 percent of Kotak Mahindra, stock exchange data showed, before the block deal through two investment vehicles.
A spokesman for Kotak Mahindra Bank in Mumbai declined to comment on the deal. Warburg Pincus officials did not immediately respond to calls for comment.
Shares in HDFC, which the market values at roughly $21 billion, were trading down 1.3 percent at 688.8 rupees on Wednesday afternoon, while the main Mumbai market .BSESN was up 0.49 percent. Kotak Mahindra was up 2.2 percent at 509.4 rupees.
(Additional reporting by Abhishek Vishnoi and Prashant Mehra; Editing by Tony Munroe)